US March retail sales drop twice as fast as forecast

Retail sales volumes shrank twice as fast as expected last month amid broad-based softness by categories.

According to the Department of Commerce, in seasonally adjusted terms, retail sales dropped at a month-on-month pace of 1.0% to reach $691.7bn (consensus: -0.5%).

Excluding often volatile motor vehicle sales they dropped by 0.8% (consensus: -0.4%).

Auto sales dropped by 1.6% on the month, alongside a 5.5% drop in gasoline station sales and 2.1% falls in sales of both electronics and building materials.

Sales of clothing meanwhile declined by 1.7%.

Non store retailers on the other hand posted a 1.9% jump in sales.

"The bigger picture is that the March retail sales numbers confirm that the apparent strength at the start of the year was nothing more than a weather-driven fluke, amplified by seasonal adjustment problems and the one-time uplift to social security payments. January and February saw 267 fewer heating degree days than normal, the second-lowest since 2000, temporarily boosting sales above its softening trend since the summer," said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

"We expect an outright decline in consumption in the second quarter, in part due to the negative carry-over from the small drop in February and large drop in March."

However, James Knightly at ING pointed out that the so-called 'control group' of retail sales, which feeds into the GDP numbers, declined by 0.3% (consensus: -0.5%).

That put the quarterly annualised rate of increase in the control sales group at 9.5%.

"Combined with the hot core CPI MoM print (+0.4%) and the firm jobs story through the first quarter, it should keep the Fed in the mindset of hiking 25bp in early May."